BRUSSELS, Oct 13 The European Union, governments
and telecoms companies have only four months to resolve a
long-running impasse over the bloc's desire to end mobile phone
roaming charges or risk disruption to services when the new
rules take effect next June.

Faced with a crisis of confidence after Britain's decision
to leave the EU, tweaks to the new rules ending roaming charges
were presented last month as proof that Brussels can work for
consumers. However, continued failure to work out who will pick
up the bill could yet throw a spanner in the works.

Politicians have long portrayed roaming fees as an insult to
single-market ideals and a symbol of corporate greed. The
problem, however, is that companies banned from charging extra
for calls or data while customers are abroad still face
wholesale charges from the foreign networks that connect them.

"The wholesale pricing issue still hasn't been dealt with,"
said one senior EU official familiar with a decade of roaming
negotiations.

"They've created a big expectation on roaming and they now
have to solve a problem they've had for years."

And the clock is ticking. The ban on roaming charges will
require lower caps on wholesale prices to avoid a knock-on jump
in domestic prices, which diplomats say need to be agreed by
around the end of February to become law before June.

Yet dreams of a United States-style continent-wide market
appear as elusive as ever, with the 28 EU states jealously
guarding their lucrative control of national airwaves while wide
disparities in living standards mean prices vary hugely.

The Irish, for example, spend nearly 10 times more on mobile
phone bills than Latvians. In tourist-rich southern Europe,
meanwhile, companies are fighting pressure to cut their rates.

DONE ROAMING?

Retail roaming fees account for about 5 percent of all EU
retail mobile revenue and companies warn that if wholesale
charges do not fall they could recoup income by raising prices
in their home markets, effectively making poorer customers
subsidise frequent travellers.

There is also the possibility that some operators will
simply decide to stop offering roaming services entirely.

Finnish operator Elisa said in a written
submission to the European Commission that the risk of a
waterbed effect on domestic prices was very high in markets like
Finland, where domestic prices are low and mobile service
bundles are very generous.

Yet passing on the cost to consumers has the potential to
damage market share and could amount to commercial suicide,
argues Innocenzo Genna of MVNO Europe, a mobile operators trade
association.

"Increasing prices in a competitive market is a deadly
solution," Genna said.

Deutsche Telekom's response to the Commission's
consultation on the subject said that without limits on how much
customers can use their phones abroad, operators would be "put
under severe pressure" if they are unable or unwilling to
increase domestic prices.

Such pressure would be particularly keenly felt by operators
that offer cheap and generous domestic packages, such as those
in Scandinavia.

"Lower wholesale prices will definitely help those companies
to survive," Andrus Ansip, the European Commission vice
president for digital affairs, told Reuters.

LOOPHOLE CONUNDRUM

Compounding the problems facing the EU is a loophole that
would allow some operators -- if they can show a revenue hit of
at least 5 percent -- to apply to their national regulators to
continue with roaming charges.

EU lawmaker Miapetra Kumpula-Natri believes the issue could
even derail the proposed ban on roaming charges.

"It will not happen if ... operators have to cover a price
that is excessive for them," said Kumpula-Natri, who is steering
proposed European legislation to cap wholesale roaming fees.

Less powerful players -- especially those who do not own
their own networks, including the likes of Sky and
Fastweb -- can be required to pay up to the EU
maximum wholesale rate of 50 euros ($56) per gigabyte, enough to
listen to about 300 songs online.

The EU executive proposes setting the cap at 8.50 euros per
gigabyte, while Brussels lawmaker Kumpula-Natri thinks it should
be 5 euros, dropping to 1 euro by 2021.

Member states remain deadlocked and there is little leeway
to work the numbers to please everyone across different markets,
as years of wrangling on retail caps have shown.

Vodafone, in its submission to the Commission's
consultation, said it did not believe there is a "sweet spot"
for wholesale caps that would allow everyone to offer free
roaming on all tariff plans.

Now the challenge is to cut a deal by February so that
companies do not find themselves taking drastic action to
prevent losses.

"We've been kicking the wholesale can down the road," an
executive working for one telecoms company said. "We're not
talking about making less money but potentially losing money."

(Additional reporting by Alastair Macdonald; Editing by David
Goodman)

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